Time running out for ITV ad system>

The Incorporated Society of British Advertisers’ decision to hold an “action seminar” on the television trading system in February illustrates the degree to which the system came under pressure last year.

More than five years of constant flux in the TV market, with new channels, changing ownership and the disappearance and creation of sales points, has not changed the way that ITV sells its airtime, that is by using the station average price (SAP) system.

But last year that system, where price is related to a broadcaster’s audience, revenue and the share an advertiser spends, came under pressure from three directions.

The Laser/CIA dispute illustrated just one way the system could go wrong and be manipulated. And, if some reports are to be believed, it is one of a number of cases where things have gone badly awry.

Two of the sales houses indicated last year that they would like to see the SAP scrapped. TSMS announced it wanted to start giving discount based on the volume spent by advertisers rather than simple share.

Laser’s view is that the demand and quality of peaktime ITV should mean it is traded on a fixed-price basis – essentially at an extra premium to that already charged for peak.

On the other hand Carlton Sales pledged its support for the present system. A position that makes some sense while there is no clear idea of what could replace it.

“We will be able to bring Martin (Bowley, managing director of Carlton Sales) along when we have Mick (Desmond, at Laser) and Jerry (Hill, at TSMS) supporting the same thing,” says one senior advertiser.

Yet agencies and broadcasters have managed to tie up the 1996/97 negotiating season relatively swiftly – all under SAP – so the trading system necessarily stays in place for at least next year.

And buyers and sellers are also waiting to see the effect Channel 5 will have on the market and how far cable and satellite will continue to grow in audience and advertising share.

“The structure of the industry, the way people trade, is still heavily influenced by the way a monopoly system is traded,” says Jerry Hill, chief executive of TSMS. “Now that one third of commercial airtime is non-ITV, the significant alternative commercial viewing means increasingly the old way will become unsustainable.”

Hill is the first to admit he does not know what will replace the old regime. However, some people in the market already have their favoured systems.

“A pre-empt ratecard could suit the needs of advertisers,” says John Storey, managing director of Media Audits. A pre-empt, or spot, ratecard involves broadcasters auctioning their premium spots to the highest bidder on an individual basis. “Advertisers might have to pay more, but they could justify it if they knew exactly what they were getting,” says Storey.

Some reports have indicated that a pre-empt ratecard could be worth as much as 100m in extra revenue to ITV if managed properly.

“The UK has always been a highly negotiable market,” he adds. “With more competition it will become more negotiable.”

The only consequence Cuff sees coming from the Laser/CIA dispute is that agencies and broadcasters will make absolutely certain they meet their deals. “Otherwise there is little that will actually happen in 1997.”

“Deals will eventually move from being share-based or even volume-based to taking into account audience delivery,” he says.

“Rather than renegotiate the following year’s discount because ITV’s ratings go down – as is done under SAP – money should be able to move immediately to wherever the audience is.”

But many agencies have a vested interest in SAP because it allows their buying performance to be clearly judged, so agency support for change is not guaranteed.

“The market will decide what comes next,” says Hill. “My hunch is that you will have some very serious TV-spending clients for whom a strong ITV is important to their business.”

This looks very much like the onus for change being on advertisers, although ISBA has no preferred replacement to SAP. But it does have a long-standing concern about media inflation and does want change. “There is no such thing as an official ISBA line. ISBA is not able to say there must be change, but it can draw together the debate,” says Bob Wootton, director of media for ISBA. “SAP forces an emphasis on a price relative to what our competition is paying rather than on absolute value,” he adds.

“We also need something that gives broadcasters an incentive to produce higher ratings, which SAP does not do, but it must not be an excuse for broadcasters to force up prices.”

The SAP debate seems to have reached the “something must be done” stage. What is needed next is a degree of consensus on what.

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